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China’s economy has slowed from its blistering growth earlier this year after the government took measures to ward off inflation and rein in a runaway property market, government data released on Thursday showed.

The country’s gross domestic product rose 10.3 percent in the second quarter, compared with an increase of 11.9 percent during the first quarter.

Li-gang Liu, China economist at ANZ in Hong Kong, said the data showed that China was still charging ahead at a more reasonable rate.

“We think there is still a lot of heavy lifting for monetary policy makers and inflation has not peaked,” he said. “But the monetary tightening policy so far has had the intended result.”

China’s industrial output for June also signaled tempered growth. Production rose 13.7 percent last month compared with the same month last year. That was down from a 16.5 percent increase in May over May 2009.

At the same time, inflation slowed to 2.9 percent in June, down from 3.1 percent in May and below the government’s official target of 3 percent, according to the National Bureau of Statistics.

Economists largely applauded the slower growth, saying the government needed to tame property prices after the first quarter’s galloping expansion in gross domestic product was the highest in three years.

“At the moment, it is good news,” said Stephen Green, head of China research for Standard Chartered Bank in Shanghai.

“The economy was overheating, and the government over the past six months has withdrawn some of the stimulus. They have done a pretty good job of taking the heat off.”

Record lending last year was a crucial part of the government’s efforts to stimulate the economy. This year, China repeatedly tightened reserve requirements for banks. Chinese banks reported a sharp drop in loans in the first half of the year.

The government also imposed certain restrictions on property buying.

“We are now starting to see the effect of policies dealing with excessive housing prices,” Sheng Laiyun, a spokesman for the government’s statistics bureau, said at a news conference in Beijing.

Green said fluctuations in China’s economy were often overblown by investors.

“Global markets have a kind of Jekyll and Hyde attitude toward China,” he said. “Either it is booming and saving the world or it is collapsing and taking the world with it.” 


NY Times